Stainless Steel Flanges from China and India Inv. Nos. 701-TA-585-586 and 731-TA-1383-1384 (Prelim.)

September 6, 2017

On Behalf of

The Coalition of American Flange Producers

International Economic Research

L L C

Dr. Seth T. Kaplan

skaplan@ier-llc.com

202-403-9439

Overview

Conditions of Competition

Injury

Threat

Economic Analysis

Overview

Conditions of Competition

Injury

Threat

Economic Analysis

Conditions of Competition

Subject and domestic SS flanges are highly substitutable.

Subject and domestic SS flanges compete head-to-head.

Demand for SS flanges is inelastic.

Demand has declined over the POI.

C o f C

Substitutability

Highly Substitutable

"Stainless steel flanges, both domestic and imported, within a specific size and type are essentially a fungible Commodity." - Commission Opinion 1994 (Final)

• SS flanges are produced to ASTM A - l 82 • Domestic and subject producers use the same grades of

steel: 304/304L, 316/316L

• Producer and importer questionnaires certify the high degree of substitutability

Source: Stainless Steel Flanges From India and Taiwan (Final). USITC Inv. Nos. 731-TA-639 and 640. Pub. 2724 (Feb 1994). Commission Opinion at 1-19.; Importer Questionnaires 5

C of C

Head to Head

Competition Compete Head to Head

All purchaser questionnaire respondents ranked price as Critical Or Very important - Figure 4, Staff Report 1994 (Final)

"Subject imports and the domestic product have similar channels of distribution." —Commission Opinion 1994 (Final)

Market Attributes

• Same distributors

• Same end uses and end users

Source: Stainless Steel Flanges From India and Taiwan (Final). USITC Inv. Nos. 731-TA-639 and 640. Pub. 2724 (Feb 1994). Commission Opinion at 1-19, Staff Report at 11-48.

C o f C

Inelastic

Demand is Inelastic

"There are no practical substitutes for forged stainless steel flanges." -Commission Opinion 1994 (Final)

"The demand for stainless steel flanges is relatively inelastic." Commission Opinion 1994 (Final)

"Purchasers would be reasonably insensitive to price changes Stainless Steel flange products." -Commission Opinion 1994 (Final)

Source: Stainless Steel Flanges From India and Taiwan (Final). USITC Inv. Nos. 731-TA-639 and 640. Pub. 2724 (Feb 1994). Commission Opinion at 1-6 and 1-19.

C of C

Demand

Demand is Falling

Note: Chart is indicative of trend Source: ITC Dataweb, Petitioner's Questionnaire Responses

C o f C

Demand Global Capital Expenditures on Oil and Natural Gas Refining

refining capital expenditure

billion 2016$

90

share of total capital expenditure

. 30%

refining capital expenditure (left axis

20%

30

20

10

0

10%

i 1 i i 1 i i 1 1 i 1 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

• Refining capex at lowest level in 10 years • Capex falling during entire POI

Source: Financial Review of Global Oil and Natural Gas Industry: 2016. U.S. Energy Information Administration, 17 May 2017. PDF.

C of C

Demand

Crude Oil Prices, 2014-Jul 2017

120

u «

CQ

s-C r: U

"3 Q

100

80

60

40

20

2014 2015 2016 2017

Source: West Texas Intermediate Crude Oil Price - FRED https://fred.stlouisfed.org/series/MCOILWTICO, Retrieved Aug 25,2017 10

C o f C

Demand

Natural Gas Prices, 2014-Jul 2017

cc c o

u C

—

C5

O Q

2014 2015 2016 2017

Source: Henry Hub Natural Gas Spot Price https://vv^vvw.eia.gov/dnav/ng/hist/rngwhhdM.htm, Retrieved Aug 25, 2017

Overview

Conditions of Competition

Injury

Threat

Economic Analysis

Injury

Volume The increase in the volume of subject imports is significant in the interim period

Subject Imports

U-i

o

14,000

12.000

10.000

8,000

B 6,000

4,000

2,000

2016 Jan-Jun2Q17 Jan-Jun

Share of Domestic Production Volume

2016 Jan-Jun 2017 Jan-Jun

Share of ADC

2016 Jan.-Jun. 2017 Jan.-Jun.

Note: Share of Domestic Production Volume and Share of ADC charts are indicative of trends Source: ITC Dataweb, Petitioner's Questionnaire 13

Injury |

*••»•» I The volume and share of subject imports is significant

Note: Charts are indicative of trends Source: ITC Dataweb, Petitioner's Questionnaire 14

Domestic Share Calculation

Dom F o r g e + F i n

DoniT, I t - i • + JVL- + M t ; j _ > ^ w x x j . p o r g e + p m

l v J - F m . - L V XForge

Dom F o r g e + F i n + Dom F i n ( M F O R G E )

Dom F o r g e + F i n + M F I N < + M F O R G E

Dom F o r g e + F i n + Dom F I N . (M F O R G E )

Dom F o r g e + F i n + M F I N

Injury

Volume

Import Penetration Calculation

X V A F m . Forge

Dom F o r g e + F i n + M F I N > + M F O R G E

M F M .

Dom F o r g e + F i n + M F I N

16

Injury

Price

Quarterly Import AUV

•India > China 1 A i l Subject • A l l Nonsubject

:

"6

5.000

4.500

4.000

3.500

3.000

2.500

2.000

1.500

1.000

0.500

2014 2015 2016 2017

Source: ITC Dataweb, Global Trade Atlas GTIS

Injury

Effects

The Negative Impact of Subject Imports

Trade Indicia

Output 0

Trade Indicia

Capacity Utilization 0

Trade Indicia Sales 0 Trade Indicia

Market Share 0 Trade Indicia

Inventories •

Financial Indicia

Return on Investment 0

Financial Indicia

Cash flow 0

Financial Indicia

Profits 0 Financial

Indicia

Ability to Raise Capital 0 Financial Indicia Investment 0

Financial Indicia

Growth 0

Financial Indicia

Margin of Dumping 0

Financial Indicia

Factors Affecting Domestic Prices 0

Employment Indicia

Employment 0 Employment

Indicia Wages 0 Employment

Indicia Productivity •

Overview

Conditions of Competition

Injury

Threat

Economic Analysis

Threat

0

0

0

Subject Imports Threaten Further Material Injury to the U.S. Industry

Increases in production capacity, or existing unused capacity, in the exporting country likely to result in increases in imports to the U.S.

Rate of increase of the volume or market penetration and likelihood of further increases in subject imports.

Whether prices are likely to cause significant price depression or suppression and increased demand for further imports.

0 Inventories of the subject merchandise.

0 Potential for product-shifting

Information regarding the countervailable subsidy and whether imports are likely to

increase.

Any other demonstrable adverse trends indicating the probability that there is likely 0 to be material injury by reason of imports (or sale for importation) of the subject

merchandise (whether or not it is actually being imported at the time).

Source: 19 U.S.C. § 1677(7)(F)(i), see Petition Volume I at 35-51. 20

Threat

—1 Excess and Divertible Capacity in India and China

Exports o f SS Flanges (Thousands o f lbs.)

Item 2016 2016 Jan-May 2017 Jan-May

China

Exports to U.S. 5,353 1,611 2,473

Exports to World 126,446 48,741 46,160

U.S. Share of Total Exports 4% 3% 5%

India

Exports to U.S. 17,342 7,789 7,971

Exports to World 75,273 25,625 31,354

U.S. Share of Total Exports 23% 30% 25%

China and India Total

Exports to U.S. 22,694 9,400 10,445

Exports to World 201,719 74,366 77,514

U.S. Share of Total Exports 11% 13% 13%

Note: Partial year data only available through May Source: UN Comtrade Database, GTIS Trade Database HS Code: 730721

Threat

Volume

Excess and Divertible Capacity in India and China

Indian Exports to U.S. as Share of Indian Exports to World

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2016 2016 Jan-May

2017 Jan-May

Chinese Exports to U.S. as Share of Chinese Exports to World

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2016 2016 Jan-May

2017 Jan-May

Note: Export data only available through May 2017, Part year data not available for China Source: UN Comtrade Database, GTIS Trade Databases HS Code: 730721 22

Overview

Conditions of Competition

Injury

Threat

Economic Analysis

Econ. Analysis

But-for "But-for" the unfair imports, the domestic industry would be materially

improved

• Demand is inelastic

• Substitutability is high

• Subject market share is high

• Alleged margins are large

• Evidence of significant subsidization

Under the conditions of competition in the stainless steel flange industry the effects of the unfair trade are material.

Econ. Analysis

Declining Demand Declining Demand Should Lead to

Increasing Domestic Share

DOMESTIC

Domestic Imports

Econ. Analysis

Declining Demand Declining Demand Should Lead to Increasing Domestic Share (Cont.)

DOMESTIC

Domestic Imports

Econ. Analysis

Declining Demand

DUMPING

Declining Demand Should Lead to Increasing Domestic Share (Cont.)

DOMESTIC

Domestic Demand Decline

Dumping